Tuesday, March 22, 2011

Gold Fluctuates, Pushed To Last-Minute Gain By Rise In Oil

U.S. forces had to attack some villagers to rescue two jet fighter crew members who got downed after their plane crashed. So far, American troops have shouldered a heavy load in the operation. Hopes of transferring the prosecution of the Libyan warlet to NATO foundered because of infighting. Despite some progress being made at the stricken Japanese nuclear plant, WTO crude oil jumped to reach almost $105/bbl during the day. The driver is Yemen, which seems to be moving towards civil war. Gold didn't follow oil up, but a last-minute climb triggered by oil taking another jump pushed the metal to a slight gain when regular trading ended.

Gold's pit session didn't start all all that well. A decline that started a bit before regular trading got rolling continued until 9 AM ET, when the metal touched a day's low of $1,418.80. Recovering afterwards, it climbed up to $1,428 before letting off. A report that U.S. housing prices declined 0.3% in January added to the boost. Then, except for a slight dip to $1,423 around 1:15, it stayed in a $1,424-$1,428 range until near the end. The early-morning decline was touched off by a mild recovery by the U.S. dollar. At the end of the session, gold marched up and broke through $1,428 but didn't ascend much farther when trading halted. As of the end of regular trading, the metal managed to eke out a gain. The spot price was $1,428.80 for a rise of $1.70 on the day. The KitcoGold Index attributed +$2.55 to predominant buying and -$0.85 for a strengthening greenback.

The metal's six-month chart, from Stockcharts.com, shows a slight loss because its coverage period ended a little before regular trading did:

As it is, the chart shows today's action as a candlestick that's almost all wick. In gold's favour is its Moving Average Convergence-Divergence (MACD) lines, found at the bottom of its chart, edging towards a bullish cross after making a bearish one eight days ago. They're not there yet, but they're closing in. Such is consistent with gold recovering the ground it lost during last week's plummet. Desite that hopeful development, gold seems stuck right now in the 1420s. The drivers are losing their potency, suggesting the metal will continue to lagger.

After falling so steadily, it's not surprising that the U.S. Dollar Index would eventually climb a bit. That it did today, although the real climb was in the early morning stretch when gold slid. Moving from below 75.3 as of 8:30 to 75.55 by 10:05, the Index's climb both triggered and outlasted gold's tumble. But, the Index stalled at 75.5 and dropped just before noon to 75.4. The afternoon was spent fluctuating a little above that level until it inched up in later afternoon; that mild advance was blocked at 75.5. As of 5:30, the Index was moseying at 75.47.

Its own six-month chart, also from Stockcharts.com, shows today's small gain ending its three-day losing streak:

Needless to say, the greenback's trend is still downwards. Today's advance is little more than a countertrend reaction. It may go upward for a while longer if further containment efforts at the Japanese nuclear plant shows progress and in so doing help ease down the yen.

Gold may be stuck, but its recent action has put it well above its old support level of $1,410. Its reluctance to move much further, except sideways, is consistent with a consolidation period. Worries developing over Indian demand, and the appearance of secondary gold at a discount to official sellers' prices there, suggests that the usual source of support is dwindling. Still, gold is doing fine without its usual Asian cushion. It'll likely dawdle this overnight session, but it might get a another temporary boost in the wee hours of the morning from the fighting in Libya.

1 comment:

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Originally, The Gold Bubble was a perch for me to watch what I pegged as a nascent gold bubble - or, to be less controversial, the third stage of a long-term gold bull market.

As time went on, I drifted towards commentary on gold and the greenback, plus the interrelation between the two. The rest of the posts featured items about gold that I thought were interesting. I ended up diverging from the theme that the title promised.

So, I've reactivated the old blog under a different name. "The Gold Watcher" is a more accurate title for the blog that The Gold Bubble became.

The Enter Stage Right article that kicked off the predecessor blog contains a fuller explanation of my reasoning about a gold bubble: it's here. A sequel is here.

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Although I try to compensate, I do have opinions that are almost certainly influenced by what I've done with my own money. For the record, I am long gold-exploration stocks. On the odd chance I mention one that I own, I'll disclose it fully. I don't own any physical gold, nor do I own any producers or any well-known explorers.

Also, I must emphasize that I am not a registered investment advisor, and that I am not licensed to dispense investment advice in my jurisdiction of residence (Ontario, Canada). Consequently, this is not an investment-advice blog. It shouldn't be taken as such. I cannot provide any actionable material in the standard sense of the term; if you're intrigued by anything here, you'll have to see to your own trigger.

In addition to the standard boilerplate caution for you to do your own due diligence should you invest or speculate, I'd like to add a special caution: gold, by far, is the asset class that elicits the most emotions. A solid consensus of experieced investment professionals considers emotionality to be a performance-hobbler. In addition to doing your own research, and/or using a licensed professional to do so, I suggest that you watch yourself.